The Stoxx Europe 600 index followed Tuesday's 0.8% rise by advancing 1.3% to 267.73. BP, a component of the index, rose 2.5% on market speculation the oil company could be getting payment from Anadarko Petroleum, joint operator of the Deepwater Horizon oil rig, regarding last year's explosion and oil spill in the Gulf of Mexico. Spokesmen for BP and Anadarko declined comment.

Banks rose on signs there soon might be a resolution to the U.S. debt-ceiling negotiations, after President Barack Obama shed light on a possible bipartisan deal to manage the U.S. deficit. The Stoxx Europe 600 banks index rose 3.7%. Société Générale jumped 5.1% in Paris, and Banca Popolare di Milano rose 7% in Milan.

"Banks are heavily owned and also heavily shorted. Whenever you get even a bit of a letup in the news flow or even a few bits and pieces of positive news, you are going to get a bounce," said John Ventre, fund manager at Skandia Investment Group.

The Stoxx Europe 600 technology index rose 0.8%, though off the day's high. Chip designer ARM Holdings jumped 4.9% in London after Apple said earnings more than doubled and iPhone sales will top targets. ARM designs chips for the iPhone.

In London, the FTSE 100 rose 1.1% to 5853.82. helped by BP. Barclays soared 5.2%, Lloyds Banking Group 4.1% and Royal Bank of Scotland Group rose 3.1% after a Treasury Committee said more work needed to be done on an overhaul of the banking system, including proposals for British banks to 'ring-fence' their retail operations from investment arms. The proposals had been criticized by bankers.

BASF shed 1.2%, a day after RBS cut its rating on the shares to "hold" from "buy," saying the chemicals concern could miss second-quarter expectations.

In Paris, the CAC-40 surged 1.6% to 3754.60. BNP Paribas and Crédit Agricole each surged 4.6%. EADS jumped 3.6%, as AMR, parent of the American Airlines, said it will buy 460 new aircraft from Boeing and EADS-owned Airbus. Also, Merrill Lynch said it was upbeat on approaching second-quarter results for EADS. It added that its top picks are Rolls-Royce Holdings, which rose 2% in London, Zodiac Aerospace, up 4.5% in Paris, and Meggitt, up 1.6% in London.

Hermes International climbed 3%, a day after the luxury-goods purveyor reported a 21% rise in first-half sales and lifted its outlook for the year.

In Madrid, the IBEX 35 index rallied 3.1%. Financials were in focus, as the market digested the debut of savings bank Bankia, which fell early but recovered somewhat to 3.746 euros, a bit below the offering price. Bancco Santander rose 5% and BBVA climbed 4.4%.

In Milan, Fiat climbed 5.2% after Goldman Sachs Group reinstated coverage on the Italian auto maker with a "buy" rating, with the analysts saying they see several near- and long-term catalysts for the company.

By early afternoon in New York, the euro had strengthened to $1.4207 from $1.4153 late Tuesday in New York. The dollar moved to 78.73 yen from 79.18 yen. The euro weakened to 111.84 yen from 112.15 yen. The pound strengthened modestly to $1.6148 from $1.6124. The dollar moved to 0.8194 Swiss franc from 0.8242 franc.

Crude-oil prices fell. Inventories in the U.S. fell more than analysts' expected last week, according to the U.S. Department of Energy. The price of the light, sweet, crude-oil futures contract for August delivery fell 56 cents to $97.30 a barrel on the New York Mercantile Exchange.

Gold prices fell, as a U.S. debt deal looked more likely and investors chose to move away from risk adverse investment areas. Most actively traded gold for August delivery on the Comex division of the New York Mercantile Exchange was down $3.60 at $1597.50 a troy ounce.

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